No region will be left to default, Montoro pledges

The Popular Party (PP) administration says it will take a firm position with Spain's 17 regional governments by demanding that they meet their deficit reduction goals this year no matter what happened in 2011.

The conclusion was reached at a meeting between Finance Minister Cristóbal Montoro and the economic chiefs from PP-controlled regions, which lasted beyond midnight on Wednesday. During the closed-door gathering, advisors expressed enormous worries about the dire financial state of some of the regions.

"The government will not permit any region to go into default," Montoro said, according to some of the politicians present. "Any default in a region means that Spain is in default, and we are not going to let this happen. We will look for mechanisms."

Meanwhile, the Cabinet is expected to take up a report today on a proposed regional budget stability law, which would reportedly enable Spain's most financially problematic regions to submit petitions to the central government if they need assistance, Efe reported.

The European Union has called on Mariano Rajoy's government to set a rescue plan for those regions whose finances are in dire straits as its number-one priority.

Regional governments fear that they will lose autonomy over their finances as the PP administration tries to clamp down on runaway spending and grapple with the large deficits that some local governments are facing.

Montoro also told the regional economy chiefs that they need to eliminate more than 500 public companies and can no longer contract supply employees.